Saturday, September 22, 2012

How to Destroy the Global Economy

    World leaders seem determined to destroy the global economy via their idiocy.  Ever helpful, the Village Elliot will elucidate for our leaders some simple steps that are likely to bring the world to the brink of destruction. 
     Actually, the global economy can probably be brought down by the United States (the number one economic superpower in the world), and China (the number two economic superpower).  
     In some ways the economies are built upon opposite principles.  China's amazing economic growth for the past 30 years has been fueled by an export-based economy, rolling up government surpluses (at least until recently) and discouraging consumption.  They few economic success in terms of their production.  Through a variety of laws and political maneuvers, their economy is export-friendly and consumer-unfriendly.  Hence, according to Wikipedia, China is by far the number one producer of commodities such as steel (8 times the US), aluminum (10 times the US), coal (3.5 times the US),  cement, (30 times the US) and many many others. The US produces more natural gas and oil, but otherwise we are nowhere near China.  Their manufacturing technology is also by far better than the US. China produces twice as many cars.  The US no longer even tries to produce its own TV's and VCRs and let's not even talk about cheap-o children's toys.   Overall, the Chinese Industrial Output was valued at about 4.4 trillion dollars versus 3.4 trillion for the US.  
 China produces a bit of steel---eight times the output of the US, which used to be number one in the world.

    The US, on the other hand, bases its economy based on comsumption, not production.  Hence we out-consume the Chinese by two to one even though China out-produces our industrial output. Figure that one out, please.    The US economy is partially financed by its incredible buying power, and strong banking (at least until recently) such that our politicians are gladly sponsoring some 1.5 trillion dollars of national debt per year, and an annual trade deficit of some 500 billion dollars.  Oh some of the congress may pretend to be upset at the deficit, but as long as the standard of living is maintained among likely voters, they have proven that they are willing to tolerate massive debt.  

    The problem is that when things go sour, the politicians try to fix things by doing what they have always done.  In China, there are now warehouses that are completely full of merchandise that they can't sell because overseas demand is completely saturated.  I mean, how many Happy Meals can they expect American kids to eat?   The average Chinese worker works 60 hours a week but doesn't make enough money be able to afford to buy the products that they make.    The solution?  Lower the price and export even more!!

   In the US we have high unemployment and stagnant growth, not to mention an inconceivably large deficit.  It would only make sense if we could modify our system to favor hiring the people who are now unemployed so that they could make some of the products that are currently imported.  However, our politicians simply can't imagine  that.  Our politician's solution?  Borrow more money and import even more to maintain the average standard of living.  If we have additional unemployment, it doesn't matter as long as purchasing power among the employed goes up to compensate.  

    What would happen if these politically imposed economic trends continue?  China will produce more and more stuff at a lower and lower price while it's people all suffer in poverty.  In the US, rich people will have warehouses full of possessions imported from China, while the rest of the American people are unemployed.   Likely this is not going to actually happen however, because at some point the people will wake up and toss these idealogues out of office.

  What's really going on here is that politicians are too rigid in their thinking.  Any economist can tell you that you need different strategies to fit a changing situation.  When the economy is bad, you need tax cuts and increased government spending.  Conversely when the economy is growing you need to increase taxation and cut back on spending.  This is in fact what happened in the Clinton era, but was reversed by Bushanomics in which we cut taxes and increased spending with a growing economy.  Not smart. 

   This whole thing would work if China would find policies that would allow its workers to be paid enough to buy more of the products that are produced, and export less.  On the other hand, the US needs to employ its workers, and one way to do that is to decrease imports and manufacture more products domestically.  That results in more hiring and more jobs and less borrowing.  

   In the case of the US, this is unpalatable, however.  We really don't care that much about the unemployed, and we certainly don't want jobs for involving commodities like energy, or the basic building blocks of economic growth including  iron, steel, cement, non-ferrous metals, chemicals, etc.  Heavy industry is considered environmentally icky, and if we hire a bunch of workers, they just unionize anyway.  So politicians are not comfortable with heavy industry.     Hence our politicians are not adverse to destroying jobs in these fields, and allowing them to go overseas..   Better we should create a new economy based on Americans pushing paper around,  and allow China to produce products and sell them to us at ever lower rates. 

America does not really care about workers in heavy industry, as terrible as that sounds.   Give American politicians the choice between cheap stuff from China versus low unemployment, and they'll take the stuff, thank you very much. 

Sunday, September 16, 2012

Bipartisan Dysfunction in the Middle East

     Although the major parties disagree on a number of issues, there seems to be widespread agreement on the policy of intervention in the Middle East.  In particular, both parties have embraced the George W. Bush doctrine of Regime Change, in which America is justified in taking military or other action in the Middle East if governments are immoral or overly oppressive.  This was invoked in the case of Iraq and Afghanistan after failing to find Weapons of Mass Destruction (WMD).  By providing these countries with constitutions based on the American version, the idea is that these countries will become friendly to the United States and the West.  

     Where do we get such ideas?  I've always thought that American oilmen like Bush and Cheney were overly impressed with their counterparts in the Middle East.  Namely, Middle Eastern countries are places where oil guys go to make millions of dollars, while also being wined and dined, complete with trips to harems and all kinds of wonderful perks.   But this kind of lifestyle is not representative of the country as a whole.  Life in a dictatorship or monarch is terrible for less fortunate subjects.  Average people hate their government and the rich people at the top.  

     This discontent does not mean, however, that they are pro-US or pro Israel just because they hate their own government.  This lesson was learned all too painfully in Iraq, where Saddam's ouster and execution did not lead to solving the long-term discord between Shi'ites and Sunnis.  Just imagine Ron Paul trying to live with Jane Fonda and you can get an idea of the difficulty. 

   Similarly, US politicians would love for the enemy to be defeated in Afghanistan, so that we could lovingly rebuild the country (at much cost to ourselves) and thereby provide a better life for the inhabitants.  Unfortunately, it seems that many Afghanistanis just do not think in those terms.  They have been fighting in those regions for centuries and they don't seem inclined to stop just because it would be convenient for American politicians to do so.  They are not following the script, and for that reason we are continuing the fight in Afghanistan even though bin Ladin is dead.  No one knows what will happen to signal to us that the war is over and that it is time to come home.  Both US major parties are determined to continue to fight for at least a while longer, with Republicans hoping that the war will continue even longer than the Democrats want.  

    Nevertheless, the Obama Administration has embraced the so-called Arab Spring movement(s) which resulted in the outster of Mubarak in Egypt, and more recently Gaddafi in Libya.  In the case of Libya, the United States and NATO provided military support for Gaddafi's overthrow.  At the same time, President Obama has called for the ouster of President Assad in Syria.  The hope is that these actions will lead to stable, progressive governments in those countreis.   

    But in Egypt, this has given rise to the Muslim Brotherhood, a fundamentalist Islamist organization.  Is this likely to lead to a pluralistic government friendlier to the West than the Mubarak regime?  I doubt it. 

   In Libya, for some reason Gaddafi became intolerable to the US, and we had to send the military there to provide air cover for the revolution.  Why is this?   Back in the day, President Reagan had similar problems with Gaddafi.  Although Reagan had the reputation as a warmonger compared to Obama's as a peacenik, the fact is that Reagan never found it necessary to overthrow Gaddafi, whereas Obama found the temptation to be irresistable.  Reagan did blow up Gaddafi's palace one time in order to get his attention.  But Reagan treated Gaddafi like a juvenile delinquent, and he was the Principal.  Throughout that time, Reagan and the US never had any illusion that Libya was a friend of the US, although we did buy their oil. 

 Reagan well undestood Gaddafi was a rouge dictator, and that the country was being misled by radical Islam, but did not feel that the situation would be improved by the US trying to install a new goverment there.  

    The available evidence shows that factions within Libya continue to hate their government.  After all, they have just completed a Civil War.  In America, we are still not over our Civil War after 150 years.  It may take a similar length of time in Libya to recover.  But they hate the US even more.    We are not just a foreign country.  We represent infidelism, or the opposition to the faithful submission to Islam.   Until they evolve away from those beliefs, nobody is going to be our pal in that world.  Particularly if we are so stupid that we think that we can back one faction in a Civil War and then have everyone like us when we are done.  

President Obama and Secretary Clinton have embraced the Bush doctrine of regime change.   (AP Photo/Jim Watson, Pool)

   Recent protests, triggered by an anti-Muhammad movie, show just how deep anti-US sentiment really is.  We should not be confused by the assassination of our diplomats in Libya, however.  That was an act of terrorism by a small group of people, and the entire population does not bear respsonsibility for that action.  Both actions may be very anti-US, but the vast majority of people involved in protests did not in fact willfully plot to kill the ambassador.  But the broader expression of anti-US sentiment is prevalent within the Middle East and indicates that the vast majority of the people are in fact against us.  President Obama and Secretary Clinton are quite naive if they expect anything resembling gratitude.  After the assassination, Clinton found herself asking, "“How can this happen in a country we help liberate, in a city (Benghazi) we helped save from destruction?”  Clinton is certainly correct in pointing out that the assasination of diplomats is the action of a few people, and that the vast majority of persons involved in protests against the US were not directly involved in conspiring.  On the other hand, a better question, is whether the anti-US hatred has changed in Libya or elsewhere because of our actions, and the available evidence is that it has not.  That should be obivous to Secretary Clinton and the Administration, but it seems not to be.   By interfering in internal politics in Libya, no matter how well intentioned, we probably can expect to earn fear, mistrust and hatred.  We have chosen to disrespect the principle of National Sovereignty in which foreign powers do not interfere in the internal politics of other nations.  Well, that principle has been thrown overboard.  Welcome to the new millenium, in which the United States expects to support groups aspiriing to rule in the Middle East, even to the point of sending air support and bombers to support the groups of our choice. 

    The Village Elliot questions whether the US is realistic to expect popular support in the countries in which it works to overthrow the government, whether by moral support (Egypt, Syria) or economic and military intervention and bombings (Libya, Serbia, Iraq, Afghanistan, Iran).  And how about the calls in this election season to take military action against Syria and Iran?

     My favorite is Governor Rick Perry from Texas who during the Republican presidential debates, advocated invading Iraq yet again.  

     Yee haw!  Let's invade Iraq again!

      However, both the far right Libertarians and the far left Greens favor a policy of non-intervention.

 Jill Stein of the Green Party.

  Jill Stein is the Green Party candidate.  She says:  " We're going to see it's not over in Libya . You don't solve problems, you don't promote international stability and democracy by bringing in the army and the bombs. That does not create national stability. The humanitarian concerns were legitimate but those humanitarian aims were really cast aside very early. After NATO entered the fray it quickly morphed from protecting civilians to regime change. There was no legitimate international justification for that."   

 Gary Johnson of the Libertarian Party. 

   Gary Johnson, Liberatarian presidential candidate, puts it thusly:  "In one corner, we have the U.S. apologists warning that -- after the murders in Libya and the attack on our embassy in Cairo -- we must be careful not to say or do anything that might hurt someone's feelings. In the other corner, we have the chest-thumpers demanding that we find somebody to shoot -- and shoot them.

     I have a better idea: Stop trying to manipulate and manage history on the other side of the globe and then being shocked when things don't turn out the way we wanted. As far as what we do right now in response to the tragic events of this week, it's actually pretty simple. Get our folks out of places they don't need to be -- and out of harm's way -- and cut off every dime of U.S. tax dollars we are sending to clearly ungrateful regimes."

   In the opinion of the Village Elliot, the so-called extremists are--in this case--making more sense than the supposedly centrist Democrats and Republicans.  I want America to quit trying to be everyone's friend in the Middle East.  Be willing to deal with an adversay as Reagan did.  Buy their oil if it's for sale, but do so without deciding to take over their country and spend billions "rehabilitating" them.  What we are doing in Libya and other parts of the unstable Middle East is nonsense and we need to stop it.